Question

Liam wants to save $6,265 to purchase a car. if $4,000 is deposited into an account at 7.5% interest, compounded monthly, how many years will liam have to save until he has enough to purchase the car?

Answer 1

To solve for time taken we use the compound formula:
A=P(1+r/100*n)^(n*t)
where:
A=future value
P=principle
r=rate
t=time
n=number of terms

6265=4000(1+7.5/(12*100))^(12t)
solving for t we get
1.56625=1.00625^12t
12t=72.0136
t=6.00 years
Answer: 6 years